* EBRD sees growth at 1.7% in 2016 *
The economy will grow at a rate of 2.2% of GDP in the current year, the Ministry of Finance is expected to announce on Friday.
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The projection, due to be confirmed by the cabinet, was revealed by Finance Minister Harris Georgiades on the sidelines of a conference in London examining the economic and investment outlook for Cyprus.
“Tomorrow the Medium-term Strategic Plan for the economy over the next three years will be submitted, in which the estimate for the economy’s growth rate for this year is expected to be between 2% and 2.5%, more specifically 2.2%,” Georgiades was quoted by the Cyprus News Agency as saying.
The Minister was the keynote speaker of the ‘Cyprus Economic and Investment Summit’ organised on Thursday morning in London by Eurobank Cyprus, bringing together tens of investors and professionals from private equity firms, hedge funds, sovereign wealth funds, family offices, investment banks and corporate finance specialists.
Speaking to the CNA, Georgiades said that the outlook for Cyprus’s economy is positive: “The economy has been stabilised and has exited the protracted recession; it actually records satisfying growth rates. Therefore, the outlook is positive. But a central prerequisite is to keep up the reform effort, the wise public finances management and the efforts to further enhance the comparative advantages of the Cypriot economy.
“Today’s conference on the economic and investment prospects for Cyprus the dominant message was exactly this; that Cyprus has turned the page and that now the comparative advantages of the country in a wide array of productive sectors are highlighted. What I can assure you is that the government will continue its effort to maintain and enhance these advantages so the country can become an even more attractive destination for local and foreign investments and entrepreneurship.”
In his speech the Finance Minister noted that a “remarkable” economic recovery is underway in Cyprus, which he put down to the “resilience and competitiveness” of key sectors, as well as the “calm and rational” approach of the citizens which allowed the government to implement reforms.
He made special references to the fully “reformed and restructured” banking sector which is now based on “stronger foundations” and the successful efforts to control public finances. “Early and decisive action on balancing the budget safeguarded the stability and attractiveness of our tax regime,” said Georgiades.
Asked by the CNA about the high number of non-performing loans over which many investors have expressed concern, the Finance Minister said that there is no complacency: “It is an issue we have identified. It a legacy problem stemming from the irrational credit extension of previous years, so there is no complacency. Dealing with this issue will be helped first and foremost by the growth of the real economy and secondly by the systematic efforts of banks, along with borrowers, to have viable restructurings. I am cautiously optimistic that this process has begun and indeed it has already started producing results.”
The conference also examined the advantages of establishing a business base in Cyprus, its regional role and the variety of investment opportunities in financial services, tourism, real estate but also energy healthcare, shipping and maritime clusters, education and research, funds administration and management and airline transportation.
Jonathan Taylor Vice President of the European Investment Bank (EIB) noted in his speech that “the amount of lending activity by EIB in Cyprus clearly demonstrates the enormous confidence on the country’s economy and future.”
Meanwhile, the EBRD said the economy will grow with a rate of 1.7% in 2016 at the backdrop of an actual growth rate of 1.6% the year before, maintaining its November 2015 forecasts unchanged.
According to the May EBRD projections, the Cypriot GDP growth will pick up in 2017 reaching 2.0%
The EBRD’s latest Regional Economic Prospects report sees average growth across the Bank’s 36 countries of operations of 1.4% in 2016, a shade below the 1.6% seen last November, but above the 0.5% result for 2015. A further strengthening is seen to 2.5% in 2017.
According to the EBRD, the slightly softer outlook reflects a further drop in the price of oil since the previous report, increased volatility in global financial markets, lower capital flows to emerging markets worldwide, weakness in global trade and increasing geopolitical tensions.
Low commodity prices and the continued recession in Russia, where output is projected to contract by 1.2% in 2016 (following a decline of 3.7% in 2015) are weighing on the economic performance of Central Asia and Eastern Europe and the Caucasus (EEC). In contrast, lower energy import bills benefit Central Europe and the Baltic States (CEB) and south-eastern Europe (SEE) where growth momentum is expected to be sustained.
CEB and SEE economies also benefit from accommodative monetary policies in the Εurozone. In contrast, monetary policy in the United States is being tightened gradually, negatively affecting net capital flows to the region and to emerging markets more broadly.
Risks to the outlook come from geopolitical tensions around the region a possible sharp decelerations in China`s growth that may further exacerbate loss of confidence among investors amplify volatility in global markets.
